SpaceX's shares recently dropped below their initial public offering (IPO) price of $135, closing at $134, marking a 1.5% decrease and placing investors who bought at the IPO price in a loss position for the first time. This decline comes just over a month after the company's blockbuster IPO, which initially saw its stock surge to over $200 per share, briefly giving it a valuation rivaling tech giants like Amazon and Microsoft. The current valuation stands at approximately $1.75 trillion, down from its peak of over $2.6 trillion in June.
Market analysts attribute the stock's retreat to a combination of factors, including profit-taking by early investors, a reassessment of the company's valuation, and the unwinding of highly bullish positions established during its anticipated listing. The volatility is also exacerbated by a small "float" of just 4% of the company's total shares trading on the Nasdaq, coupled with intense market attention. Steve Sosnick, chief market analyst at Interactive Brokers, noted that recent days have lacked new catalysts to drive investor enthusiasm, contributing to the stock's underperformance compared to the broader Nasdaq index.
Despite the stock's recent dip, short sellers are facing their own challenges. While short interest in SpaceX has surged to around 31% of the company's free float, representing approximately 196 million shares, a recent rebound in the stock has caused significant paper losses for these bearish investors. Ortex estimates that short sellers have accumulated mark-to-market losses of about $760 million since the IPO. Had the stock remained at its recent low near $153, short sellers would have seen paper profits of nearly $2.5 billion. Analysts warn that this high level of short interest could trigger a short-covering rally if the stock recovers, forcing short sellers to buy back shares to limit losses, potentially driving the price even higher. Furthermore, the cost of borrowing SpaceX shares remains low, around 1%, suggesting sufficient shares are available for lending even with increased demand for shorting.
